Consider the following case study. The four largest rice-exporting nations, Thailand, Cambodia, Laos and Myanmar, plan to form a cartel. Ahead of the meeting, the countries said that the purpose of the rice cartel would be to contribute to ensuring food stability, not just in an individual country but also to address food shortages in the region and the world. The cartel will not hoard rice and raise prices when there are shortages. The Philippines says that it is a bad idea. It will create a oligopoly, and the cartel could price the grain out of reach for millions of people.

QUESTION TWO continued

REQUIRED:

1. Assuming the rice-exporting nations become a profit-maximising colluding oligopoly, explain how they would influence the global market for rice and the world price of rice.
2. Even in the absence of international antitrust laws, why might it be difficult for this cartel to successfully collude? Use the ideas of game theory to explain.